Personal Finance: Ask the Experts

Q: I filed my federal return on May 10th and received an amended 1099 dated March 15th, then a second amended 1099 dated April 1st, and then a 3rd amended 1099 dated April 15th! The total net changes are less than $20. Filing a 1040x for 2012 seems like a lot of pointless work. Can I account for these changes on my 2013 federal return rather than file a 1040x for 2012? Thanks for your help.

John
Elkton, Maryland

Q: My wife and I are retired and she is required to take funds out of her retirement IRA. Several years before we retired, we established a living trust which includes most of our assets. Now, we want to transfer her retirement IRA to the trust. We have been told that, by transferring her IRA to the trust, she would be required to pay substantial income tax. Is it possible to make the transfer without having to pay taxes at the time of the transfer?

Clarence
CA

My wife and I are both retired and have no mortgage. Because of this we use the standard deduction and have a very simple tax return. We each receive a 1099R and a SSA-1099. We also receive a consolidated form 1099 for investments. We have no other dependents or deductions.

My question: How do you find a tax preparer who is willing to give you an estimate of the cost BEFORE you have them start your return?
Thanks for your time.

Richard
Corning, CA

Q: I made $80,000 and TurboTax said I was disqualified from deducting the interest I paid to federal government on the parent loan and/or the tuition I paid. Out of pocket, both totaled over $20,000. I know I would only have received the tax education credit on the out of pocket tuition I paid but since I can't take it, can my son?
Although he was a full-time student, he made about $20,000 working part time at a restaurant and singing at a church. My status is a qualified widow..because my husband died in 2011 I was able to file joint and married.. so the threshold was 160,000 ..he had been disabled and had no income it was same source of guns..seems to penalize non married people whose income is same as two married people. Anyway if I claim my son, can he take the deductions I was not able to? I assume TurboTax was correct in saying I wasn't eligible.

Teresa
Sacramento, CA

Q: I own a property with a sibling in a 50/50 Percentage Ownership. With depreciation tax deductions, do we divide that depreciation deduction by the percentage of ownership? That is what I understood is the federal tax law. My sibling's tax preparer states that we cannot divide it, that only one person can claim it and that we can take turns claiming the whole deduction. Thanks for any clarification you can provide.

Ricky,
Sacramento, CA

Q: My wife and her sister were deeded their mother's home 15 years ago. Their mother bought the home 45 years prior. What would be the tax base for determining capital gains?

Sam
Sacramento

Q: I'm filing a Schedule D and Form 8949 for an inherited property held as an investment. The property was sold in 2012 and there is a net loss after deducting the real estate commission and expenses incurred to improve the value of the house, such as new kitchen floor, refinishing the wood floors, painting exterior and interior, and the cost of staging the house. Is there a way to itemized these expenses on either Sch D or form 8949 so the IRS can understand why I am claiming a net loss? Or should I not bother to itemized the expenses? Thanks

bcoffee
San Francisco

Q: In Feb. 2006 I bought a condo for my personal residence for $175k and put $35k down. I lived there until Nov. 2008 when I purchased a home here and moved. From Nov. 2008 until Sept. 2012 I rented the condo out at market rate. I short sold the condo in Sept. 2012 for $52k with the mortgage balance at $120k. There was a write off amount on the mortgage which I plan to counter by demonstrating insolvency. Am I able to write off any of my capital loss on the condo?

James
Roseville, CA

Q: My accountant told me something I found unbelievable, and I felt I had to get a second opinion. I have been spending a substantial amount of money in recent years to support my uncle, who lived in an assisted-living facility until he died in early 2013.

I claimed him as a dependent through the years that I've been aiding him, and he's been in the nursing home. But I also filed my taxes under "single" filing status. This year, my accountant claimed that the IRS rules had changed, and that I could file as "head of household" because of my support of my uncle, even though he never lived with me.

This would save me a lot of money. But I can't believe it's legal.

Thanks much for any help you could provide.

Ed
Roseville

Q: I refinanced my mortgage in 2012, which left a points balance that I had not yet fully deducted over the life of the loan. The IRS says I can deduct the remainder all at once in 2012 -- unless I refinanced with the same lender. Which I did. However, TurboTax and other online software programs do not make provision for a refinance with the same lender, instead, they are giving me the entire deduction for the points from my previous loan. In reality, I need to combine the points remainder with my new points -- and deduct all of them over the life of my new loan. I can juggle the numbers to make my return come out right (i.e. fake out the tax software), but I am thinking it might be safer to fill out the paper forms and mail them in. Advice? Thank you.

Dave
Sacramento, CA

Q: What are the advantages or disadvantages to doing your own taxes electronically rather than going to a professional tax preparer?
Donald
Sacramento

Q: I contributed to my Roth IRA in 2011, but discovered when preparing my 2011 federal tax return that I wasn't qualified to make a Roth IRA contribution because of my income level. So I recharacterized my 2011 Roth contribution to a traditional IRA in March 2012. In August 2012, I converted this money back to my Roth IRA. My understanding was this series of transactions are considered legal and correct. I received a 2012 1099-R from my mutual fund, and it says this money I pulled out of my traditional IRA is taxable. I don't understand this, because I didn't deduct the recharacterized contribution to the traditional IRA on my 2011 tax return.

Q: My question has to do with the money I'm using from an IRA for all my closing costs on purchasing my first house. I'm looking to spend about $20,000. By taking money early from an IRA to buy a house, my understanding is that they only waive the 10% tax penalty on the first $10,000. That means anything I use beyond that I pay taxes on, PLUS 10%.
I'm trying to get an idea of whether or not I will owe taxes next year based on this additional taxable income. My income for 2013 will probably be around $72,000, not including the IRA distribution. I think my only credit is the child tax credit and as of 4/11 I claim single and 0. (Prior to this I claimed single and 5. I figure it's wise to pay more taxes this year). I will file as head of household in 2013.
Erin
Salem, OR

Q: After receiving what I thought were all of my W-2s, 1099s etc., I filed my 2012 return. I owe on the federal but received a refund from the state. Last week I received a 1099 form from the mortgage company that owns our 2nd mortgage. During the course of the year, we were told that as a "good faith" customer, we would receive a check for $300 for making payments on time. We received a total of $800 from them. Besides being very late, what are the tax consequences of this amount? I see an amended return in my future.
Skippy
Roseville, CA

Q: I am a triathlete. My wife & I are partners in a sports promotion LLC here in California. It only grosses about $25,000 a year and has about $12,000 of assets that are fully depreciated. We sold the business in December 2012 for $20,000. The sales price is $10,000 for the equipment & $10,000 for the company's name & reputation, or goodwill.
How do I report the sale? Is it reported on the LLC tax return? Are there any special forms that need to be filed with the CA Secretary of State or is the final 2012 LLC tax return all that needs to be prepared? Any help would be greatly appreciated. thank you.

Rod
Fresno, CA

Q. 170 vacant, unimproved acres (3/4 mile on beach), with ownership split 40 ways within extended family, sold to Land Conservancy in 2012. Our portion is about 1.2% and was given to us in 2002 by father. How do we determine value of property in 2002 for income tax purposes? No realtor in area (Santa Barbara Co.) can help us.

Nancy
Meadow Vista, CA

Q: We share ownership of 170 vacant, unimproved acres (3/4 mile on the beach), with ownership split 40 ways within our extended family. In 2012, the parcel was sold to to a land conservancy. Our portion is about 1.2 percent and was given to us in 2002 by a father. How do we determine the 2002 value of property for income tax purposes? No Realtor in the area (Santa Barbara County) seems able to help us.
Nancy
Meadow Vista, CA

Q. My son lost his house to foreclosure in 2010. My wife and I purchased a foreclosed home in Sep 2012 for him and family to live in. We are sole property owners on the deed with my son making the mortgage, utility payments, closing cost repayment with additional money for needed repairs. I made repairs and improvements on the property in 2012. When his credit is re-established, our intent is for him to refinance the mortgage balance and purchase the house.
For tax purposes, since we bought the house, is this a rental property or a second home? If it is a rental property, I am not asking fair market rent for this property. However, I want to receive tax benefits for closing costs, taxes, insurance, improvements, etc. As long as he continues payment of all financial costs, we do not consider this home a money making investment, but an investment in my son's future. Please advise.
Frank
Sacramento, CA

Q: I have a tax return question. Last year, I signed IRS Form 8332 giving my then-husband the ability to claim our youngest son on his taxes. We were separated and in the midst of a divorce. After filing last year's return, our divorce was finalized.

In the divorce agreement, it was agreed that I would claim our youngest son on my taxes. We have two kids and they both live with me full time and occasionally visit their dad, who moved out of state. When preparing 2012 taxes, is there a form that needs to be fill out that cancels out the 8332 form that I signed last year?
Lisa
Sacramento, CA

Q: Would it be better tax-wise to use overtime cash payments (I think overtime payments are taxed much higher) at the end of the year to pay for my full year 401(k) contributions, rather than money from my paycheck?

Jose
Sacramento, CA

Q. My siblings and I (9 of us) inherited my mom's house in Oct 2009 which was in a trust. The market was down so we decided to wait until the market picked up before selling it. It was apprasied at $785K and we sold it in Nov 2012 for $810K. After subtracting real estate commission of 5% and other closing costs, the net to us was $763K. The net loss for each of us is $2,444. Can we deduct the capital loss against our income?

Byron
Oakland, CA

Q. As a power of attorney for my mother I sold her home in GA where she had lived for 18 years for $62M with a $5M downpayment and the balance to be paid in monthly installments to me to use to help with her support. She was 84 years old so no capital gain to report, in poor health and I had to move her cross country to live with me, then in assisted living and ultimately nursing home before her death. On the payments I received I reported the interest as income for 15 years. Then buyer stopped payments in 2011; foreclosure in mid 2012; sold property in Nov., 2012 at a tremendous loss. How do I report loss to IRS & CA? What forms? Can I take the entire loss ($30M) for 2012 or does it have to be spread out? Your detailed info will be much appreciated. Thank you.

Judy
Fresno, CA

Q: My understanding is that a gift to someone that is to be jointly shared with a spouse, even if it is less than the exclusion amount for the gift, must be reported on a gift tax return (Form 709) to the IRS. Is that true? In order to avoid estate settlement problems later, should gift tax returns be submitted for prior years in which gifts were given but no gift tax returns were submitted? Would there be penalties, fees, etc. for late returns (assuming that the life time exemption is not exceeded)? Is there an amnesty or forgiveness program for those who fess up to their ignorance of the law?
Robert
Sacramento, CA

Q: I am planning and researching my retirement. Here is my tax question for tax year 2012.

I am filling single for 2012, my Gross income for 2012 was $60,010.29
I am contributing to my Simple IRA in 2012 $13,650.00
----------------- -
$46,360.29
I paid in 2012 to my ex wife spousal support $ 3600.00
----------------- -
$42,760.00
I am opening an tax-defered Traditional IRA for 2012 $ 6000.00
------------------ -
$36,760.29
I have for the 2012 tax year medical bills of $ 3000.00
--------------- -
$33,760.29
My question is: Do I fall in the IRS inflation adjusted bracket
at 15% because the $35,350?
Or do I still fall in the IRS inflation adjusted bracket at 25%
because the $85,650?
I look forward to hearing from you. Thank you.

Q: "I just received my pay check for the weeks of 12.09.2013 thru 12.22.2012 we are paid bi weekly, they have already withheld 6.2% for social security that goes into effect in 2013. I'm paying the higher rate for wages earned in 2012, don't they have to wait til 2013 to implement the higher tax rate?

Thanks for any info
Julie"
Streamwood, IL

Q: I just received my pay check for the weeks of Dec. 9, thru Dec. 22, 2012. We are paid bi-weekly and they have already withheld 6.2% for Social Security that goes into effect in 2013. I'm paying the higher rate for wages earned in 2012; Don't they have to wait until 2013 to implement the higher tax rate? Thanks for any info.
Julie, Streamwood, IL

Q: We recently set up a family trust. Are there any different tax forms needed to file our 2012 taxes? And if so, what are they? Thank you
Phil, Carmichael, CA

Q: I was executor of my mother's estate who passed away April 2011. She owned many CDs that matured at different dates and were staggered into 2012. I cared for my husband during his terminal illness and he passed away November 2011. Times were stressful and I only dealt with the CDs that matured in 2011. My question is how do I handle the reporting of the interest income on the 1099s to IRS for the CDs that were closed in 2012? Some were in my name only and others in my name and a sister's as co-beneficiaries. Thank you for any help in this matter.
Connie
Roseville, CA

Low-income workers got a friendly reminder from the IRS today: You could be eligible for up to $5,800 in refundable tax credits.

Known as the "Earned Income Tax Credit," it's intended to help low-to-moderate-income workers who earned up to $50,270 in 2012.

But as many as one in five eligible taxpayers never sign up. "This year, millions of workers could qualify for EITC for the first time, and the IRS urges them not to overlook this valuable credit," said acting IRS commissioner Steven T. Miller, in a statement.

Q: Both my wife and I have to commute to different areas everyday for work and it makes it impossible for my daughter to go to the public school we are zoned for. We send her to a private elementary school near where my wife works. Is there any tax breaks we can use from having to send our child to a private school because of our work locations?

Jared
Sacramento

Q: I just completed 5 years with the school district and have become eligible to purchase air time. This option will end January 1, so it's really making me think it's something I should seriously consider. It's pretty expensive, about $6,000 per year purchased. I was wondering what the penalty would be if I cashed in my Roth IRA - about $10,000 - to use as a down payment on the air time ($3,000 for 5 yrs). I haven't looked at my statements lately, but I think much of it is not earned, but is original principal. Do you have to pay a penalty if all the funds are your own? CalPERS will not allow a rollover from a Roth IRA.
I sure appreciate your help.

Susan
Roseville

Q: I have received emails saying that if you sell your home in 2013, you must pay a 3.8% Medicare tax on the sale. This greatly concerns me because I will be putting my home on the market next year. Do you know anything about this? Is it true or just another urban legend? Thank you for your help.

Charlotte
Loomis, CA

Q: We have about $6K in a 529 for our daughter's college expenses. Now that she is a freshman, we have incurred a few expenses: $1,200 laptop, $700 payment and books. My question is this: Is it better to withdraw the funds from our 529, or use the education credit on our federal tax return? I know I can't use both and I'm not clear about the education credit options. Reading the IRS site, it appears you can't use the American
Opportunity for room and board. She did receive the CSU Cal grant of approx. $3K per semester, a $1,000 Pell Grant, and a $1,000 scholarship. I don't want to make a withdrawal from the 529 until I'm sure that I'm unable to use the credit.

Susan
Roseville

Q: Over 40 years ago my husband and I purchased whole life insurance policies. Over time we took out policies on our children as well. We didn't always have enough money to pay the premiums so our agent suggested we borrow from some policies to pay premiums on others. We've been doing this for years now and the loans against the policies are large. We are retired now and still paying every month for these policies. We'd like to get out from under the premium payments, but have been told that we would have to pay taxes on the loans. If we pay off each policy and then cash them in, would we owe taxes on the cash value? Thank you for the help.
Susan
Antelope, CA

I will receive an inherited IRA. When cashing it out, should I have taxes withheld?

Doug,
Sac

Q: I wish to will money held in an account at a major stock trading firm to one of my children for distribution among my adult children and grandchildren. Are there inheritance and/or gift taxes involved in the passing of this money (which is in stock)?

Jerry
Rio Vista

Q. I currently owe federal taxes in the amount of $12,200 and California state of $11,000. I understand and have contacted three companies that say they can help me, but I have to pay them $3,000 to $5,000. The IRS is taking over $1,500 out of my retirement and I am having problems taking care of my bills. Do you know of any company that will let you pay monthly payments? I don't work but get Social Security and military retirement. I would appreciate whatever help you can give me. Thank you! Phil, Citrus Heights

Q. My mother-in-law put her home in a family revocable trust fund. She took out a reverse mortgage to pay for home health aide. She passed away in 2010. The trust fund became Irrevocable upon her death. We couldn't sell the house, so all five siblings paid off the reverse mortgage (checks were written to the family trust fund). The house was appraised at $300,000 when reverse mortgage was taken out six months before her death. It has now appraised for $279,000. If/when the house sells, do the heirs pay capital gains tax on all the money that is distributed? Or, does each sibling get to deduct the amount that was paid toward the reverse mortgage first? Cathy, Roseville, CA

Q: We recently started our son in private elementary school in the fifth grade. Do you know of any federal/state tax income tax benefit on the monthly tuition we are paying? Any way we can route the payments to get federal/state income tax benefits? I heard the term "School Voucher" but could not find much detail on it. Appreciate your thoughts or guidance on the subject. Thanks, Shevtank, San Diego, CA

Q: Hi, I was divorced two or three years prior to the settlement of assets. The house was "inner spousal transferred" to me with an IRS lien attached with my ex's name only. I had always filed separately. He had a business and it stemmed from that, not in my name. I have talked with an IRS agent and was told it is not my debt. The lien was put on before the settlement. I have refinanced two times since the transfer took place. We are trying to take care of some settlement issues regarding his child support arrears and house money I owe him (house money I owe is from settlement). We would like to zero the two issues out so we don't owe each other but I do not want to be held liable for his liens. How do liens work when it is against an individual? I am at a loss. Please advise. Thank you Debi, Citrus Heights, CA

Q: I had a hardship withdrawal from my 401(k) in 2012 to pay for my mortgage. I did not pre-pay any tax or penalty. I understand that when I file my 2012 tax return, I have to pay tax and penalty on the amount I withdrew. However, I can imagine that it is a rather hefty amount and I may not have enough money to pay it. What are my option(s)? -- Thank you, Elk Grove

Want to be an IRS tax preparer? The IRS is seeking volunteers to provide free tax help to seniors as well as taxpayers who are low-income, disabled or with limited English skills.

Calling it "people helping people," the IRS requires no previous experience. Volunteers will be trained and certified in how to prepare simple individual tax returns that can be filed electronically. Other volunteer jobs, such as greeters at tax centers, also are available.

"Yes, anyone can sign up. ...The only skill needed is the desire to help people in your community," said IRS spokesman Richard Panick in an email.

Q: I own mineral rights to land in North Dakota and have been leasing those rights to oil and natural gas prospectors for approximately seven years. In February of this year I began receiving disbursement checks for the oil and gas recovered from two wells. I would like to know how this money is taxed by the federal and CA state governments. Thank you for your assistance. -- Wayne Karlstad, Elk Grove, CA

Q: How do i clam gambing loss for IRS and federal taxes? -- Rick, Fresno, CA

Q: My 94-year-old father now lives with my eldest sister and she is also the executrex/trustee of his $1.2 million estate which is in a trust. If Congress does not move to keep the current exemption level at $5 million, will he be taxed only on the amount over $1 million or the full amount? Second question: Is there any way to reduce the amount over $1 million? Third question: Can she/he gift each of us $13,000. Without paying gift taxes? Is that $13,000 for children only or is it OK to gift another $13,000 to my spouse? Please help. Thank you. -- Sherry, Rancho Murieta

Q: Sir, We are having a very difficult time trying to pay my taxes that we owe the IRS, currently at a total of approximately $12,888.00 for two years, 2010 and 2011. I have made arrangements with the IRS and am making a payment of $100 per month for a period six years for the first period, which owe I believe 2010 $4,200. The second period is 2011 and is owing at $8,600 and the IRS is asking for double the monthly payment for six years which we cannot afford. I have already used everything that I have available in paying off other bills. My wife has a 401(k) that she can take out $5,000 against this. Is there any way the IRS could possibly take this and call it even? Would they consider this as a settlement for back taxes? -- Dirk, Folsom, CA

Q: I own two investment properties with my dad in Sacramento. I live in Seattle and am thinking of purchasing a residence here, but have some questions on a 1031 Exchange:

Thanks for any assistance. -- Scott, Seattle, WA

If you've been frustrated trying to resolve an IRS tax issue, don't fret. There's free help from the Taxpayer Advocate Service, known as TAS, which works with individuals and businesses.

The TAS assists those who haven't been able to resolve their IRS issues or who face adverse economic hardships because of tax troubles. As the IRS notes: "You may be eligible if you've tried to resolve your tax problem through normal IRS channels and gotten nowhere, or you believe an IRS procedure just isn't working as it should. The worst thing you can do is nothing at all!"

It also offers specific tips for taxpayers who were clients of nationally known "Tax Lady" Roni Deutch, whose North Highlands law firm collapsed in 2011 amid accusations that it cheated clients out of millions.

For free, walk-in help in Sacramento, there's a TAS clinic open from 8:30 a.m. to 4:30 p.m. at the IRS office, 4330 Watt Ave. Or call (916) 974-5007. To find the nearest TAS office in all 50 states, call (877) 777-4778.